Table of Contents :
Gilt funds are a type of Debt Mutual Funds that generate fixed interest rates and invest in securities of the central and state governments. The money in this investment plan is generally invested in infrastructure and other government expenses. Offering reasonable returns, the low-risk mutual fund investment can be medium-term or long term.
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Gilt Funds: Functions & Features
How Gilt Funds Function?
The Fund manager of a gilt fund allocates funds to government securities, issued by the Reserve Bank of India (RBI) for a specific tenure in order to lend money to the government for development purposes. RBI, an apex bank also acts as a banker to the government which provides loans by raising funds as and when required. The government takes a loan from RBI against these securities that collect funds from the investors. After receiving the loan, RBI returns government securities, post which the mutual fund investors get their money back along with the interests.
Features
Returns: Being a debt fund, it offers reasonable and fixed returns. Also, since there is lesser risk involved, the returns offered would not be as high as compared to an equity fund. However, the returns are highly variable with the overall interest rate and it is best to invest when the rate regime is falling.
Risks: It is one of the best investment plans for those who prefer capital protection over high returns. Gilt Funds are secure as they are invested in government securities. This fund is different and considered less risky than Bond Funds as they do not invest in corporate bonds.
Term: Gilt funds are usually invested in for medium and long term investment spanning, generally ranging from 3 to 5 years. If someone wants to invest in Gilt Funds, then he must have an investment horizon of 3-5 years and be ready to park his money for the given duration. It must be noted that Gilt Funds are not available for short term investment.
Tax Benefits: Capital gains from Gilt Funds are taxed on the basis of their holding period i.e. for how long the money is invested. The capital gain on funds that are invested for a time period of less than 3 years is called Short Term Capital Gain (STCG) and if it is invested for a time period of more than 3 years, then it is called Long Term Capital Gain (LTCG). All long term debt funds including gilt funds are taxed at 20% with indexation benefits and at 10% without indexation.
Who Should Invest?
Gilt funds are known to satisfy the security needs of investors. It is considered an ideal mutual fund for investors who are risk-averse and those who can invest for a longer duration. Even though the returns offered are moderate, the fund provides a better asset quality. Also, when capital markets are going down and you want safer returns on your investments, then gilt funds are the best mutual funds to ride on the interest rate volatility. Moreover, it is an opportunity to be a part of the nation-building process through investment while earning returns.
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List of Top Gilt Funds to Invest in 2021
| Fund Name | AUM (Cr) | Returns over 1-Year | Returns over 3-Year | Returns over 5-Year |
| Franklin India Government Securities Fund | 2437 | 15.66% | 5.66% | 9.34% |
| SBI Magnum Gilt Fund | 1,639 | 16.57% | 9.07% | 11.18% |
| HDFC Gilt Fund | 1,271 | 11.97% | 6.04% | 10.27% |
| ICICI Prudential Gilt Fund | 1,138 | 12.30% | 7.75% | 10.53% |
| Reliance Gilt Securities Fund | 1,089 | 17.95% | 9.91% | 11.98% |
| DSP Govt Sec Fund | 593 | 16.90% | 8.50% | 10.20% |
| UTI Gilt Fund | 556 | 15% | 9.13% | 10.74% |
| Kotak Gilt Investment | 462 | 14.24% | 6.81% | 9.16% |
| IDFC G Sec Fund Investment Plan | 441 | 18.52% | 9.18% | 10.73% |
| Aditya Birla Sun Life Government Securities Fund | 262 | 16.24% | 8.70% | 11.04% |
| Tata Gilt Securities Fund | 170 | 15.79% | 7.63% | 9.67% |
| L&T Gilt Fund | 129 | 13.43% | 7.61% | 10.42% |
| Canara Robeco Gilt Fund | 84 | 13.96% | 7.92% | 10.40% |
| Edelweiss Government Securities Fund | 80 | 16.39% | 8.42% | 10.37% |
| PGIM India Gilt Fund | 63 | 14.51% | 7.67% | 9.46% |
| Axis Gilt Fund | 45 | 15.67% | 7.36% | 9.29% |
| LIC MF G Sec Fund | 44 | 16.50% | 8.28% | 10.10% |
| IDBI Gilt Plan | 33 | 13.51% | 5.33% | 7.59% |
| Invesco India Gilt Fund | 26 | 16.35% | 7.74% | 9.74% |
How to Invest in Gilt Funds?
- Log in/Sign Up to Paisabazaar.com
- Enter details like name, mobile number, KYC details
- Click on ‘View Funds’ and compare more than 200 funds on the basis of ranking, AMCs (Asset Management Company), etc.
- Analyze various gilt funds and invest in the top funds of your choice based on your investment horizon, amount to be invested and your financial goals
Also Read: Gilt Fund With 10 Year Constant Duration